Some question PRC staff's PNM financial ties

Posted: Sunday, February 8, 2015 7:00 pm | Updated: 1:22 pm, Tue Feb 10, 2015.

Some critics of PNM’s controversial power-replacement plan say the state commission reviewing it may have a conflict of interest — and may have violated state law — because three of the agency’s staff members used to work for the company and still have financial ties to the utility.

The Public Regulation Commission is expected to rule in the next few months on a proposal by PNM, formally known as Public Service Company of New Mexico, to close half of the coal-fired San Juan Generating Station near Farmington and replace the electricity with a mix of nuclear, natural gas and solar power.

The commission held a three-week hearing on the plan last month that drew heated testimony from people for and against the plan. Among its supporters were the three commission staff members who are former PNM employees.

One of those staff members, Bruno Carrara, the commission’s electrical engineering bureau chief, owned 300 shares of stock in PNM when the hearing began. State law prohibits commissioners or employees of the commission from having a financial interest in companies they regulate, excluding pensions. Carrara sold the stock after the issue was raised during the hearing.

Along with Carrara, the commission’s utility director, Dwight Lamberson, and accounting bureau chief, Charles Gunter, also worked for and receive pensions from PNM. “If I had believed it was a conflict of interest, I would have said something,” Lamberson said.

Mariel Nanasi, executive director of the nonprofit New Energy Economy and a frequent PNM critic, called the close ties between PNM and the regulatory staff problematic.

“The staff’s purpose is to balance the interest of the utility and the consumer,” Nanasi said. “I just think anybody who has analyzed their actions will say they came in heavily on the utility side. That’s not supposed to happen.”

She is asking that the hearing officers consider that relationship when reviewing the staff members’ support for the plan.

Others say it is a conflict of interest for the staff to own stock, but not for them to have worked for PNM.

“It’s not unusual for former utility employees to work for the commission,” said Steven Michel, attorney for Western Resource Advocates, which frequently serves as a PNM watchdog in rate cases. “Their experience is often valuable and can be beneficial to the public. While it is a conflict for commission employees to own stock in regulated companies, in my experience Mr. Carrara is an honest public servant with a great deal of integrity. I have never seen him act in a way that seemed driven by self-interest. I say this even though I often disagree with him on regulatory issues.”

Michel said it’s more of a problem when a commission employee goes to work for a regulated company than the other way around. Rep. Brian Egolf, D-Santa Fe, introduced House Bill 27 to prohibit former PRC hearing examiners, utility division directors and attorneys from being employed by a regulated company for two years after leaving the agency. The bill cleared the House on Thursday and now heads to the Senate.

Carrara’s stock ownership and the past careers of other Public Regulation Commission employees came up during the hearing on PNM’s plans to replace coal power at the San Juan Generating Station. PNM and other partners propose abandoning two of San Juan’s four coal-fired units and replacing the power with nuclear, natural gas and solar sources, as well as more capacity from a remaining coal unit. Any plan ultimately approved for San Juan will determine the energy sources for PNM’s half-million customers for the next 20 years.

The commission employees’ past experience with PNM is a big benefit when it comes to utility rate cases and the San Juan power replacement case, said S. Vincent Martinez, the agency’s chief of staff.

“The experience gained at the utilities has a direct bearing on the quality and understanding of the various issues dealt with on a daily basis,” Martinez said.

Commissioner Patrick Lyons said PRC staff shouldn’t own stock in companies the agency regulates, but he doesn’t think it is a conflict of interest for utility staff to have worked for PNM and to receive pensions. “We have got to trust the employees to do the right thing,” Lyons said, noting that any staff recommendations are vetted by attorneys, a hearing officer and the five-member commission.

Carrara said the PNM stock he owned dated to 1978. He said he sold most of it off a while back and had not done anything with the remaining 300 shares in years. Carrara said he disclosed that he owned PNM stock when he was hired to work for the commission and no one at the time said it was an issue. According to the Bloomberg Business website, the stock was worth about $30 a share when he sold it, for a total of about $9,000.

Carrara and Lamberson both said they were not aware Carrara might be violating a state law by owning utility stock while working for the regulatory body. “If I had known that, I would have sold it immediately,” Carrara said.

Commission staff, along with PNM, Western Resource Advocates and other parties, reached a partial agreement over the San Juan power-replacement plan several months before January’s hearing. But three of seven parties to the plan - including Western Resource Advocates, Renewable Energy Industries Association and New Mexico Independent Power Producers - withdrew from the agreement during the hearing as new information came to light about the costs of the plan and the possibility that PNM would have to use more coal capacity at San Juan than it originally proposed.

“We continue to support the stipulation [agreement],” Lamberson said. “It is the best deal for ratepayers and still gives the company the financial stability it needs.”

Contact Staci Matlock at 986-3055 or Follow her on Twitter @StaciMatlock.

Correction: The story originally reported that most of the parties had withdrawn from a partial agreement to a plan by Public Service Company of New Mexico for replacing power at a coal-fired power plant. Six parties signed the agreement originally and one joined later. Of the seven, three have now withdrawn support for the plan. 

Read the article here. 

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